Apparel retailers to have a tough year ahead: Analysts, ICICI Securities

03 January 2022, Mumbai:

Year 2022 is not likely to be easy for apparel retailers, believe analysts. Rising Omicron cases are an immediate threat to the pace of recovery, says Akhil Parekh, Analyst, Centrum Broking, Three concerns will plague retailers in 2022, the first being sharp inflationary pressures.

Investors will have to watch how companies battle higher input costs and the impact on demand of the price hikes taken. Parekh added, Second concern is the potential restrictions/lockdowns due to Omicron. Third, the anticipated GST rate hikes on textiles.

Apparel retail companies may see a gradual demand recovery entering CY22 amid rising concerns around Omicron. Most companies have strengthened their balance sheets in CY20-21 via equity raise, managed cost structure and working capital well, and are in a better position to manage current uncertainties, adds Analysts, ICICI Securities.

Store additions are expected to pick up pace this year with retailers factoring in a strong rebound in demand. But, this could limit significant upsides in the near term. Strong brands with good balance sheets would continue to benefit from the unorganized to organized shift, adds Parekh.

The biggest risk retailers may face in 2022 is lower-than- expected demand recovery, he adds further.

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